Exploring the Benefits and Features of DIFC Foundations: A Guide by Maldbury & Co
In recent years, owning real estate in Dubai has become more accessible and cost-effective, attracting a growing number of investors keen to capitalize on the city’s growth and tax advantages. The government has facilitated this through new legislation, progressively opening Dubai’s real estate market to foreign investors.
A notable development in this space is the introduction of the DIFC Foundations regime under DIFC Law No. 3 of 2018. This regime offers a flexible solution for succession planning and asset structuring, yet many investors, both local and international, are still unaware of its benefits. Below, we provide an overview of the key features and advantages of establishing a DIFC Foundation.
Key Features of a DIFC Foundation
- Establishment by Founder(s): A DIFC Foundation is created by one or more founders to allocate specific assets to designated individuals or purposes.
- Legal Personality: The foundation has its own legal identity, separate from its founder(s) and beneficiaries. Unlike a typical company, it has no shareholders or partners and is instead ‘self-owned’.
- Foundation Charter: The foundation must have a charter that outlines its name, objectives, description, duration, and a declaration from each founder requesting the council to comply with its terms.
- Council Administration: The foundation is managed by a council, similar to a company’s board of directors, with at least two members appointed by the founders to oversee the foundation’s assets and objectives for the benefit of the beneficiaries.
- By-laws: The foundation’s by-laws define the duties and functions of the council members and detail how the foundation’s assets can be distributed and accumulated.
- Registered Office Requirement: Although there is no need for a physical presence in the DIFC, the foundation must have a registered office within the DIFC, which can be fulfilled through a registered agent.
Advantages of a DIFC Foundation
Flexibility: A DIFC Foundation offers significant flexibility in terms of management, governance, and control. The foundation’s charter and by-laws can be customized to meet the founder(s)’ specific needs and objectives, which can be modified over time to accommodate changing circumstances.
Succession Planning: Founders can separate their personal wealth from their commercial interests, re-structuring the ownership of personal assets by transferring them to the foundation. This allows UAE residents to include local real estate assets in their legacy planning, not just overseas assets.
Retaining Control: Even after transferring assets to the foundation, founders can retain control over these assets during their lifetime and beyond through the foundation’s charter and by-laws.
Real Estate Ownership: The DIFC has an MOU with the Dubai Land Department (DLD) permitting DIFC entities, including foundations, to own real estate assets registered with the DLD. Typically, a property transfer incurs a 4% fee of the property value, but if a property is transferred to a DIFC foundation as a gifting transaction, it may qualify for a reduced fee of 0.125%, subject to DLD’s discretion.
Why Choose a DIFC Foundation?
DIFC Foundations provide a robust and versatile option for wealth management, succession planning, and corporate structuring. They are particularly attractive for their solid governance structure, privacy, and ability to include local real estate in estate planning.
At Maldbury & Co, we understand that every client’s situation is unique. Therefore, we recommend seeking personalized advice to determine whether a DIFC Foundation is the right solution for your specific needs. As a licensed corporate services provider, we can guide you through the process of establishing a DIFC Foundation and ensure that all legal and regulatory requirements are met efficiently.
Contact Maldbury & Co today to learn more about how a DIFC Foundation can benefit you and your business.
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